President Biden’s top economic adviser said Friday that lawmakers should take advantage of a looming tax debate next year to try to reduce budget deficits by sharply raising taxes on corporations and the wealthy.
Under that plan, Biden would more than offset the cost of maintaining tax cuts for people making $400,000 a year or less.
In a speech to the Hamilton Project at the Brookings Institution in Washington, Lael Brainard, who heads the White House National Economic Council, gave the most detailed explanation yet of how Biden would seek to shape what promises to be a multitrillion-dollar tax. . debate.
A batch of tax cuts enacted in 2017 by former President Donald J. Trump, who will face Biden in a rematch this fall, is set to expire at the end of next year. Includes cuts for people of all income levels. Republicans built that sunset into the tax bill to reduce their projected cost for deficits and comply with congressional rules.
Brainard’s speech renewed Biden’s commitment to cutting taxes for middle-class Americans and raising them for high-income earners. But his comments expressed more concern about rising debt and deficits than the president and his aides had previously shown when discussing the looming tax debate.
“At a minimum, we should avoid deepening the fiscal hole created by the Republican tax cuts by paying in full for any tax cuts that are extended,” Brainard said, in remarks released by the White House. “And we should use the 2025 tax debate as an opportunity to meet our national needs by raising revenues across the board by asking the wealthy and large corporations to pay their fair share.”
The comments reflect a growing effort by Democrats and Republicans to set the terms of what promises to be a major tax debate next year.
Trump and his allies in Congress have sought to extend all of the expiring cuts, a move that the nonpartisan Congressional Budget Office said this week could add up to $4.6 trillion to the federal debt over the course of the year. one of each.
Biden has repeatedly said he wants to extend only individual cuts for households making less than $400,000 a year. He would allow other cuts to expire. The Committee for a Responsible Federal Budget in Washington, a group dedicated to reducing deficits and the nation’s growing debt burden, estimates that Biden’s extension of those provisions would likely cost between $1.5 and $2.5 trillion. dollars in a decade, but possibly as much as $4 trillion, depending on what provisions the president decides to expand.
Biden’s latest budget proposes nearly $5 trillion in tax increases on high-income earners and corporations. It also includes about $2 trillion in new spending programs.
In her speech, Ms. Brainard reiterated Biden’s calls to raise taxes on the wealthy and large corporations, including an increase in the corporate tax rate to 28 percent. That would be higher than the 21 percent introduced by Trump’s law, the Tax Cuts and Jobs Act, but lower than the 35 percent rate that existed before the 2017 tax package was passed.
He also appeared to suggest that Biden would seek to maintain some limits on tax deductions for households earning more than $400,000 a year, including those that would expire at the end of next year. Notably, that could include maintaining a $10,000-a-year limit on the amount of state and local taxes that higher-income earners could deduct from their federal income taxes, which has been a hot topic in higher-tax states. and predominantly blue like New York and California.
“Achieving a fairer tax system also means we cannot extend the expiring TCJA tax cuts for those with incomes over $400,000 or regain deductions and other tax breaks for these households,” he said, referring to the 2017 law. “As the president has said, tax cuts for the rich will remain expired under his watch.”
Brainard also called for additional tax assistance for some low- and middle-income Americans, by restoring an enhanced child tax credit that Biden temporarily signed into law in 2021. That credit increased assistance for parents and helped cut taxes for children. Poverty worsened dramatically in the year it was enacted, but Democrats did not extend it to 2022 or beyond. He also called for making permanent an enhanced tax credit to help people buy health insurance through the Affordable Care Act.